U.S. Trade Taxes on Indian Exports Endanger Nearly Half of Goods Destined for the U.S.
The Sagarmala project's planned expansions in western ports like Mundra and Nhava Sheva, designed to handle increased U.S.-bound cargo, may need revision due to persisting Trump tariffs on Indian exports. This is just one of the many ripples caused by the tariffs, which have been impacting thousands of micro, small, and medium enterprises (MSMEs) that supply intermediate goods to larger exporters.
With reduced orders from U.S. buyers, many of these MSMEs face the prospect of delayed payments or cancelled contracts. The tariffs are particularly hard on sectors like engineering goods, textiles and apparel, and pharmaceuticals. In FY 2024-25, engineering goods alone contributed $16.2 billion to India's exports to the U.S., while textiles and apparel brought in another $12.4 billion, and pharmaceuticals were valued at $8.7 billion.
The U.S. is India's largest single-country export destination, accounting for approximately $87.3 billion in goods trade in 2024. The Trump tariffs, announced on August 11, 2025, will impact 55% of India's merchandise exports to the United States. The combined 50% duty is scheduled to take full effect by late August, with an initial 25% reciprocal tariff imposed from August 7 and an additional 25% penalty tariff coming into force on August 27.
The tariffs have far-reaching consequences. Key sectors such as textiles, engineering goods, gems, jewellery, and pharmaceuticals are directly in the crosshairs of the tariffs. Preliminary talks are under way to accelerate free trade agreements with the European Union and the United Kingdom. The Federation of Indian Export Organisations (FIEO) has urged the government to expand the Remission of Duties and Taxes on Export Products (RoDTEP) scheme for affected sectors.
Export credit agencies such as the Export Credit Guarantee Corporation of India (ECGC) warn that payment delays could rise by 8-10% in high-exposure sectors over the next six months. In a scenario where tariffs remain in place for over 12 months, India's goods export growth could slow from 6.3% to under 4%, with the heaviest impact felt by labor-intensive industries like textiles, gems and jewelry, and apparel.
The Reserve Bank of India (RBI) warns that the overall current account could still widen by up to $8 billion if the tariff measures persist for a full fiscal year. Exporters are being encouraged to diversify into European, ASEAN, and African markets to offset the impact of the Trump tariffs on Indian exports. Pharmaceutical exporters, represented by the Indian Drug Manufacturers' Association (IDMA), warn that U.S. buyers may look to shift contracts to other low-cost manufacturing nations like Vietnam or Mexico.
The Department of Commerce has indicated that sector-specific trade fairs and buyer-seller meets will be expanded in ASEAN nations, which have lower tariff regimes and growing import demand for many Indian goods now penalised in the U.S. The long-term impacts of the Trump tariffs on Indian exports could include a reduction in India’s GDP growth by 0.2% to 0.6%, export losses estimated between $5 billion and $10 billion, considerable disruption to labor-intensive sectors like textiles, gems and jewelry, and apparel, as well as supply chain instability and shifts in trade relationships.
These tariffs threaten to undermine India's competitiveness particularly against rivals such as Vietnam and Bangladesh, potentially cause large-scale job losses, and impose operational challenges including shipment delays and order cancellations. The effects imply a challenging medium- to long-term outlook for Indian exports and economic growth unless mitigated by new trade deals or policy adjustments.
In summary:
| Impact Area | Details | |----------------------|-------------------------------------------------------------------------------------------| | GDP | Potential reduction in growth by 0.2% to 0.6%; export value losses of $5-$10 billion | | Supply Chain Stability | Disruptions including shipment delays, order cancellations; increased costs and risks | | Trade Relationships | Strain in US-India ties; India reasserts strategic autonomy; diversification to other partners; some American firms still investing in India |
- The tariffs imposed by the Trump administration on Indian exports, particularly on sectors like engineering goods, textiles and apparel, and pharmaceuticals, have created operational challenges for small and medium enterprises (SMEs) that supply goods to larger exporters, leading to delayed payments and cancelled contracts.
- The U.S.-induced tariffs have far-reaching consequences, jeopardizing India's competitiveness against countries like Vietnam and Bangladesh. These tariffs may cause significant job losses, disrupt labor-intensive sectors such as textiles, gems and jewelry, and apparel, and lead to supply chain instability and shifts in trade relationships.
- In response to the tariffs, India is seeking to diversify its export markets and accelerate free trade agreements with the European Union and the United Kingdom. The Department of Commerce has also indicated plans to expand sector-specific trade fairs and buyer-seller meets in ASEAN nations to offset the impact of the tariffs on Indian exports and maintain economic growth.
